Business owners are feeling the pressure to start getting 2019 financials ready for tax filing because the deadlines are coming up before you know it and the amount of penalties and interest are not only being attached more but also becoming more costly. The IRS is now on a hiring spree, according to Commissioner Charles Rettig, with an estimated 10,000 in the current fiscal year as of November 2019, according to an article published in Forbes magazine, with an additional 5,000 in the works.
When people start getting notices from audits to questions about specific tax return line items, these can take anywhere from 3 months to a year, although it can be carried out longer if the business being reviewed takes longer to respond or fails to adequately submit the proper documentation. One key point though you must always remember though is that the challenge is that once you submit it, trying to go back and change it doesn’t always make sense because it can cause a stigma that you haven’t been honest in the first place.
Another challenge is that not only are the annual tax returns at risk for being reviewed, payroll reports could also be pulled out separately or part of the entire process being considered. Because you have many more working parts versus an individual return, there’s a lot more opportunities that you could end up in trouble, so you need to be making regular checks to minimize your risk as much as possible.
Unbelievably people who feel the IRS is “out to get them” only feel that way when they’re usually trying to hide unreported income or failure to properly report proper expenses. The average salary of IRS revenue agents as reported by the Bureau of Labor Statistics is in the $50,000 range, so there are easier ways these employees could be making a salary versus being resented as much as they are. It’s a job like most any other and their position is to move through a case as quickly and effectively as possible. Just like closing on a sale or completing a work project, they are also measured on closing their audits in a timely manner.
What do you need to be considering?
- How many times over the years have you lost money and not paid taxes at all?
- How often do you file late, i.e. within the normal extension period versus over years?
- How does your profit compare to prior years where you can’t justify your final profit?
- Does the 1099-K (credit card reporting statement) confirm with what you’re reporting in your income section, in addition to checks and cash?
- Can you match your total income against your bank account deposits for the year?
- Pigs are greedy – hogs get slaughtered. Are you taking too many deductions?
- Verify everything before you get your taxes prepared and then put your financials side-by-side against the return to see if anything is out-of-line, and ask questions before you sign because once it’s signed then amending is another set of challenges..
Dwayne J. Briscoe